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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists if a producer can produce a good at lower opportunity cost than all other producers
Law of Diminishing Marginal Utility
Comparative Advantage
Substitution Effect
Producer surplus
2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Short run
Negative externality
Dead Weight Loss
Public goods
3. A firm that has market power in the factor market (a wage-setter)
Luxury
Law of Increasing Costs
Spillover benefits
Monopsonist
4. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Demand for Labor
Least-Cost Rule
Spillover benefits
Luxury
5. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Producer surplus
Negative externality
Price Elasticity of Supply
Unit elastic demand
6. Ed = 8 - infinite change in demand to price change
Total Revenue
Perfectly elastic
Spillover costs
Market Equilibrium
7. The sum of consumer surplus and producer surplus
Collusive oligopoly
Normal Profit
Four-firm concentration ratio
Total Welfare
8. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Profit Maximizing Resource Employment
Perfect competition
Inferior Goods
Utility Maximizing Rule
9. The ability to set the price above the perfectly competitive level
Market power
Resources
Private goods
Marginal Analysis
10. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Determinants of Supply
Production function
Perfectly inelastic
Spillover costs
11. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Price elasticity
Long Run
Profit Maximizing Rule
Break-even Point
12. Costs that change with the level of output. If output is zero - so are TVCs.
Price elastic demand
Excise Tax
Marginal Productivity Theory
Total variable costs (TVC)
13. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Allocative Efficiency
Four-firm concentration ratio
Price Elasticity of Supply
14. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Private goods
Diseconomies of Scale
Marginal Benefit (MB)
Shortage
15. A good for which higher income increases demand
Accounting Profit
Normal Goods
Marginal Revenue Product (MRP)
Subsidy
16. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Implicit costs
Long Run
Surplus
Productive Efficiency
17. ATC = TC/Q = AFC + AVC
Oligopoly
Average Product of Labor (APL)
Decreasing Cost industry
Average Total Cost (ATC)
18. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Resources
Necessity
Natural Monopoly
Diseconomies of Scale
19. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Allocative Efficiency
Marginal tax rate
Substitute Goods
Excess Capacity
20. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Marginal Benefit (MB)
Perfectly inelastic
Normal Profit
Economics
21. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Market Economy (Capitalism)
Income Elasticity
Oligopoly
Resources
22. The marginal utility from consumption of more and more of that item falls over time
Short run
Price inelastic demand
Complementary Goods
Law of Diminishing Marginal Utility
23. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Marginal Productivity Theory
Marginal Cost (MC)
Law of Supply
Perfect competition
24. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Substitute Goods
Producer surplus
Accounting Profit
25. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Constrained Utility Maximization
Income Elasticity
Marginal Cost (MC)
26. Ed = 0 - no response to price change
Perfect competition
Normal Profit
Perfectly inelastic
Marginal Benefit (MB)
27. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Demand for Labor
Negative externality
Shutdown Point
Cross-Price Elasticity of Demand
28. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Marginal Productivity Theory
Inferior Goods
Spillover costs
Total Revenue
29. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Market power
Marginal Productivity Theory
Marginal tax rate
Negative externality
30. Entry of new firms shifts the cost curves for all firms downward
Decreasing Cost industry
Average Total Cost (ATC)
Break-even Point
Normal Profit
31. All firms maximize profit by producing where MR = MC
Fixed inputs
Absolute Advantage
Luxury
Profit Maximizing Rule
32. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Allocative Efficiency
Shortage
Monopolistic competition
Law of Supply
33. AFC = TFC/Q
Economies of Scale
Unit elastic demand
Diseconomies of Scale
Average Fixed Cost (AFC)
34. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Economic Profit
Determinants of Demand
Normal Profit
Spillover costs
35. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Spillover benefits
Constant Returns to Scale
Perfect competition
Cartel
36. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Price inelastic demand
Average Product of Labor (APL)
Shutdown Point
Demand for Labor
37. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Determinants of Labor Demand
Total Revenue Test
Constrained Utility Maximization
Law of Increasing Costs
38. When firms focus their resources on production of goods for which they have comparative advantage
Marginal Product of Labor (MPL)
Profit Maximizing Resource Employment
Constant Returns to Scale
Specialization
39. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Necessity
Monopoly long-run equilibrium
Collusive oligopoly
Positive externality
40. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Total Product of Labor (TPL)
Incidence of Tax
Marginal Resource Cost (MRC)
Collusive oligopoly
41. Models where firms agree to mutually improve their situation
Fixed inputs
Collusive oligopoly
Consumer surplus
Substitution Effect
42. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Monopoly
Derived Demand
Perfectly competitive long-run equilibrium
Incidence of Tax
43. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Monopolistic competition
Incidence of Tax
Determinants of elasticity
Variable inputs
44. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Determinants of Supply
Income Effect
Price elasticity
Free-Rider Problem
45. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Law of Supply
Monopolistic competition
Economies of Scale
Diseconomies of Scale
46. Ed = (%dQd)/(%dP). Ignore negative sign
Price elasticity
Negative externality
Average Variable Cost (AVC)
Four-firm concentration ratio
47. The total quantity - or total output of a good produced at each quantity of labor employed
Total Product of Labor (TPL)
Complementary Goods
Comparative Advantage
Income Effect
48. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Normal Goods
Negative externality
Spillover benefits
Marginal Productivity Theory
49. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Positive externality
Market power
Monopoly long-run equilibrium
Economics
50. The output where ATC is minimized and economic profit is zero
Variable inputs
Surplus
Break-even Point
Marginal Productivity Theory